Inventory Shops Have Made a Comeback in 2021, Here’s Why (Inventory Series, Part 1)

Inventory was once an ugly word to customers. If you were to suggest inventory, a B2B buyer would recoil at the thought and usually respond with that dreaded phrase, “we want everything on-demand!” 

But times have changed and inventory has made a comeback. Knowing the reasons why inventory is now in higher demand, can help you guide clients toward smarter solutions and help you sell shops simpler, faster, and more profitably.

Speed is the obvious reason. As consumers, if we buy it today, we expect it tomorrow (or even same-day, in some markets). Last night I bought two items around 9 PM. It’s 1 PM as I write this and they are already at my door. Groceries, I can buy in ten minutes and have them delivered to me within a few hours. Fast convenience will always be a priority for consumers (every B2B buyer is first, a consumer) but the pandemic accelerated e-commerce by 10 years growth and with it: our habits and expectations.

But there are a few other key reasons, subtle reasons, why inventory has made a comeback and why it matters to B2B, following are five quick reasons. 

(I) The Failure of 1-to-1 

It seems that the promise of 1-pc, affordable print-on-demand is still lacking (for now). Yes, plenty of companies are producing one custom, branded piece at a time (too many companies to name here), but very few are doing so creatively and affordably. 

Moreover, when a customer comes to you for a shop, they come with an unspoken demand (sometimes it’s explicit): “We want to create a unique, one-of-a-kind selection of merchandise for our brand that is unlike any other brand out there, beyond our colors and logo, even our products we choose will be bespoke and unique to us.” 

The most successful on-demand solutions feature a modest selection of blank goods that look like everyone else’s blank goods, which eventually look like everyone else’s brand. And all at a unit price twice as high (at least) as the market value. 

Print-on-demand is for a specific type of client, think: baseball teams who all need the same style jersey or a very small business that needs print and a few shirts. Shops, for a brand, are a boutique experience (even the largest shops are boutique) in that they are a fully-custom merchandise solution, each product selected and tailored specifically for that brand. 

Print-on-demand providers and promotional agencies are in two completely different businesses. Print-on-demand expedites same-as-everyone product (so they can buy at scale) to brands that care less about building bespoke experiences. Promotional agencies create unique experiences that serve specific brand needs (like cultivating brand champions, recognizing employees, celebrating milestones, and more). 

When it comes to building a bespoke experience for a customer plus shipping 1-pc at a time, nothing is faster, more custom, and less problematic than inventory. But brand clients clamor for a 100% no-risk solution with their mech, so the demand for 100% print-on-demand remains high (and so does the price). On-demand works for some buyers and some products. The failure of 1-to-1 for brands is that it doesn’t allow for this fully customized solution at scale and why inventory has made a come-back: the promise of on-demand, highly custom merch through a boutique experience, doesn’t work for a sophisticated brand.

(II) The Buyer’s Attitude-Adjustment

An interesting evolution has occurred with the B2B buyer through the years. Back in the day, a “program” (which was poor parlance for company stores), was 100% inventoried. Then, throughout the industry, MOQ’s dropped, production times increased, and shipping times accelerated. “Programs” evolved. What was once a fully inventoried program for a customer became a hybrid (partial inventory, partial non-inventory) to the point where, by 2010, we (in the program business) were no longer recommending inventory programs and instead, suggesting a hybrid model with 80%-90% of the program drop-shipped and only 10%-20% inventoried. The client still grumbled at even that modest inventory investment, but they recognized it was a compromise they had to make if they wanted quick shipments for vital products.  

But given the failure cited above and the ever-present demand by the consumer to have product immediately, smart buyers realized that a small inventory investment is wise. In 2020, this importance became elevated as some branded apparel became vitally important: For example, during a pandemic, it was crucial that delivery drivers clearly identify who they were as they walked up to your door (shirts, signs, graphics). Also, many employee shops featured PPE (like masks), which were needed as a quick-ship item, so, the pandemic helped spike the need for quick-turn items and inventory. 

Yes, many B2B buyers still believe a 1-to-1 bespoke solution is achievable, but once you help them understand the power of purchasing custom merch at scale you can guide them to smarter inventory allocation, and identify which items in their merchandise selection make sense for quick-ship. With guidance, they soon see that they are in good hands with an agency (ie, you) who will help them develop a holistic solution.

(III) Smaller Programs Are Now (Finally!) Feasible

Back in the day, you wouldn’t take on “program business” unless that program was a minimum of $100,000 in annual sales. Back then (and we’re talking only a few years ago) to build a shop or a company store required a technologist, someone who knew the nuts and bolts of building an e-commerce store. Today, anyone in sales or support can spin up a shop and do so affordably. The entry-level to creating a shop experience is low and the options are more creative than ever before. 

If you’re still using the old $100,000 metric to qualify a shop - stop.  For those that still abide by the $100,000 rule, the customer has out-maneuvered you and so has the tech. Now that the high-tech barrier is gone, even a $20,000 “program” can be profitable if you configure the purchasing right. If I can spin up a shop for a client that wants to spend $80,000 and our shop contains only 3 items, and it’s open for only 30-days, plus the whole completion of the project takes four to five sales orders to suppliers, that’s a clean, profitable shop that didn’t quite hit the $100,000 qualifier. 

I’d rather have ten smaller shops with ten different customers than one big shop with one customer for reasons beyond a diversified client base, it also means that you’re likely building more boutique experiences per customer and therefore, more profitable projects per client. Building a shop for a variety of customers also accelerates your learning and allows you to cross-pollinate ideas from shop to shop. 

I’m not advocating bad business and that you should chase every shop (there are plenty of shop customers to avoid) but a $100,000 threshold as the law of the land doesn’t make sense anymore. 

Today, shops are created quickly by anyone and the purposes vary more widely than ever before, their convenience and immediacy are another reason why inventory has made a comeback.  

(IV) The Swag Closet Meets #WFH

Many companies have a swag closet. You know, that secret area that only a high admin person or perhaps a few people in marketing know about, a hidey-hole where the most coveted branded merch sits, for emergency reasons only.

When Covid scattered the workforce to homes, that included gatekeepers-of-the-swag who now had a bigger problem: not only did they lose their swag closet, their colleagues and employees were dispersed everywhere and they had a new problem: distribution. Before, they could ship to their employees via central hubs, regional offices, franchises, branches, or similar places. Now they had to ship to homes, so the demand for getting merchandise to multiple locations spiked (as did the complexity), which created a need for a small e-commerce shop. 

Moreover, swag rose to prominence throughout the pandemic, it became a way to celebrate, encourage, and unify a disconnected workforce. The urgent need to ship everywhere met the urgent demand to use swag as a way to stay build unity, so shop demand rose. And like many consumer trends with e-commerce that shifted during the pandemic (like buying groceries online) that trend is here to stay. 

So the swag closet, or, having a small supply of swag available immediately, became an urgent need. If you, as a distributor, can spin up a solution quickly and remain flexible and profitable, plus, build a not-too-demanding option for your team, managing their swag closet suddenly makes sense and yet still, another reason why inventory has made a comeback.

(V) The Knockout with the Stockout

If you and your team are going crazy because of stockout issues, this may help you communicate to your client just how problematic inventory stock has become for everyone: According to the Adobe Digital Economy Index, last year, both retail and B2B was beset by a host of inventory problems, as hockey-stick demand met a beleaguered supply. In January of this year (2021) out-of-stock was elevated to four times its level pre-pandemic - and it’s still climbing. 

But I don’t have to tell you that, you’re living it every day. Given that stockout issues are so pervasive, amping inventory as a solution for merchandise in your customer’s shop is a wise idea (we’ll share more tips in our next post about how to do this without breaking your client’s bank). If pre-pandemic, you suggested to clients that they stay conservative and purchase three months’ worth of inventory, perhaps you should consider beefing up those quantities and moving to a six-month purchasing schedule. We would never advocate spending too much on inventory, but given the host of inventory issues, it’s best to secure stock while you can, particularly on highly customized, highly-coveted merchandise. Stockouts, on mission-critical merch, is yet another reason why inventory has made a comeback.

Inventory Demand Will Continue to Spike 

Last year, the number of warehouses and distribution facilities that Amazon owns grew by 46% (source: The Washington Post), and “at the end of last year, UPS owned or leased more than 1,000 U.S. logistics facilities.” Warehouse demand skyrocketed due to the pandemic and buying habits changed, as more and more buyers prefer quick, e-commerce shopping for many of their needs. Now that we’ve grown accustomed to buying even more online, this trend will continue. Couple this demand for immediacy with a technology solution that’s now easier to build, plus the elevated respect for branded merchandise and its purpose, and we’ve got a unique opportunity ahead of us to capitalize on the demand for shops. 

Join us in our next post as we’ll share several inventory tips, including some do’s and don’ts from the pros, and how you can guide your client (and your colleagues) toward smarter inventory decisions!

Need more resources on how to best qualify, build, and maintain shops for your clients? Check out our Guide to Building Profitable Shops!